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A bridge to mobile payments

16 April 2010 1 comment

Retired member

What’s it going to take to get contactless payments off the ground? Contactless card payments have been proving more of a slow burner than a big bang, and the introduction of mobile phones with embedded NFC capabilities that could be used for contactless payments has also been slow.

One of the issues with contactless card payments has been that retailers are not entirely convinced of what the advantages are for them. This is especially true in the States, where retailers can already offer ‘no signature required’ card payments, which simply require a swipe of the customer’s magstripe card through a reader. With ‘no signature required’ being as convenient to use as contactless, would contactless really generate considerable extra sales?

What retailers do buy into, however, is mobile. With such a high proportion of consumers now carrying their phones everywhere and using them for an ever increasing variety of tasks, mobile phone payments are something retailers can see customers are interested in, and it would therefore benefit the retailer too. But how many people you know own a phone with NFC capability? Therein lies the problem.

Some forecasts suggest that within the next two years all new mobile phones will be NFC enabled; but even if this ambitious forecast comes true, what about all the existing phones out there? A number of “bridging” technologies are coming to the fore as a means of closing the gap. Last month, Canadian company EnStream launched a trial of its new ZoomPass Tag; a device with the same capabilities and mechanics as a contactless card, but in the form of a sticker that attaches to your mobile phone. Discover have trialled similar technology. Special SIM and SD card devices are also available that can make an existing mobile phone NFC capable.

These devices seem like an excellent middle ground that could enable issuers to make mobile payments available without waiting for consumers to have NFC capable phones. Retailers would then have a reason to invest in contactless payment terminals. Perhaps these bridging technologies will provide the kick start that’s needed for contactless payments to really take off.

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Comments: (2)

John Dring Digital Services and mCommerce at Intel Network Services

19 April 2010

Steve,

That's not what I would call 'mobile' commerce - sticking a NFC RFID tag onto my phone is no different to sticking it to my watch, or simply slipping it into my wallet. Both things I still carry with me, probably still more than the mobile which these days is often left attached to a charger somewhere. It's just another channel to market for the existing payment networks (Visa, MC etc) which have huge advantages due to their established network and being 'free' to the consumer.

All attempts to create an alternate payment system are stifled by the ramp-up and adoption time needed to prove it. Its difficult to take less from the merchant 'and' take nothing from the consumer, and have any margin in the chain to fund the technology rollout needed. And its difficult to be more convenient or simple than swiping/inserting a card.

The Zoompass 'appl' is also nothing more than an ewallet and a closed in-country system, afaiks. Even if it did link with the phone account, there would be purchase limits imposed by the regulators to stop the OpCos acting like banks. And as a consumer, I personally don't like the idea that anything can be used without a PIN, signature, password over a certain amount anyway - too much like losing a wallet full of cash. So tap and go (NFC) systems will be restricted to low value transaction scenarios for a while (e.g. Oyster) which oddly is exactly where the Credit Card model is supposed to squirm. If only the NFC RFID was truly linked to the phone and hence the phone account - then that would be a nice alternative - it requires the POS network operator to work with the mobile operators to have the NFC ID linked to the(or a) phone number.

And that's why its not taking off (yet).

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A Finextra member

10 May 2010

Thanks for your comment John.

The “bridge” technologies are seen as a way of getting contactless phone payments off the ground before contactless phones are generally available, as retailers/consumers in the US don’t see a huge benefit from contactless-card payments vs alternatives. Will they lead to alternative payment systems? Clearly some of them, such as stickers, can’t. But that’s not what the post was about. The current credit/debit payment schemes will most probably win out in the developed world at least in providing contactless payments at retailers. They see contactless payments as a replacement for low value cash transactions which are a huge payments market to go after, representing 59% of all transactions in the UK.

By the way, I agree with you, I personally would also want to use a PIN or some such for higher value purchases, and that’s what card scheme contactless-payments fall back to for payments above a certain limit (£15 in the UK).

Mobile phones with built in NFC capability will have to be more widely available for alternative payment systems to exploit them. When they are, all sorts of peer-to-peer and other payment services may flourish from a plethora of alternative payments systems providers.
Different Point Of Sale payment services will also be possible, but they do not need to use the existing POS networks as the phone’s own communications can be used to authorise transactions.

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